In the second half of this year, the nickel price has further narrowed its trading range. Looking forward to the fourth quarter, with the increase in uncertainty in the mine and the Fed's new round of interest rate cuts, the driving force of nickel prices has increased, and it is expected that the main contract will operate in the core range of 118,000 to 130,000 yuan/ton.

　　Indonesia's nickel mine production accounts for more than 60 percent of the global total. The country's energy and mineral resources department has been using the RKAB quota system to regulate the market, which basically determines the tightness of the year's nickel mine resource supply. However, the Indonesian government's approval and disclosure of the RKAB quota is not transparent, and there have been multiple cases where policies and statements have been inconsistent with each other, exacerbating uncertainties in the resource end. In July, the Indonesian Ministry of Energy and Mineral Resources announced that the RKAB approval cycle would be changed from once every three years to once a year starting in 2026; in October, the relevant decree was officially launched, and all the 2026 quotas applied for by mining companies before were invalidated and needed to be resubmitted this October. This change deepened the anxiety of local nickel companies about the raw material supply next year, and some companies have already started to prepare for the mine in advance.

　　The Indonesian government intends to maintain a tight supply of nickel ore to ensure the supply of raw materials for current operating smelting capacity, while controlling the overall supply rhythm. The main reasons are two-fold: First, the main components of the ore and smelting are different. Many Indonesian nickel smelting enterprises are controlled by Chinese capital and other foreign capital, while nickel ore is mostly held by Indonesian local enterprises. Second, in order to protect the resources, the grade of nickel ore in Indonesia has gradually declined in recent years, and the government hopes to control the speed of resource consumption. In addition, there may be disruptions in the fourth quarter of the year and the first quarter of the next year due to policy implementation and weather and other factors, and it is necessary to focus on the progress of each major enterprise's application for quotas.

　　In the past few years, China and Indonesia have significantly expanded their nickel production capacity, and since 2023, the nickel metal has turned into a situation of significant oversupply. In 2024, the nickel price has touched the Indonesian thermal smelting cost line, which is mainly composed of Indonesian high ice nickel (some can be converted into NPI) and China and Indonesia electroplating nickel capacity, which belongs to the new capacity in this round of expansion cycle, large in scale and smooth in cost curve, concentrated around 125,000 yuan/ton (corresponding to the current nickel ore price).

　　Analyzing from the perspective of intermediate product raw material supply, in the medium and short term, the lower cost MHP still cannot completely replace high ice nickel. A rough estimate shows that the demand for electroplated nickel and nickel sulfate in China and Indonesia exceeds 750,000 metal tons for the whole year, while the current MHP output is only about 500,000 metal tons, and the new capacity is being added at a slower pace, there is still a large gap. Therefore, as the marginal capacity of the thermal high ice nickel integrated capacity, the cost support of the thermal high ice nickel integrated capacity is expected to remain effective.

　　The main consumption areas of refined nickel are in the alloy and electroplating industries, with stable and slight growth in demand. Since the end of 2024, domestic stockpiling has provided a considerable amount of additional demand, but the strength of the September stockpiling has weakened, and the accumulation of refined nickel inventories continues.

　　The main consumption areas of stainless steel as a nickel metal material have broken the previous pattern of low profit and high production, with relatively poor demand performance, significant profit pressure, and ongoing concerns about hidden inventories. In the absence of strong end demand, the deterioration of industrial profits raises concerns about the sustainability of high production. Overall, the demand side makes it difficult for nickel prices to form a upward force.

　　In summary, the uncertainty at the mine end has increased, and the cost support at the lower end is effective. The nickel price should be viewed with a bullish mindset. However, the demand side is difficult to form a combined force, and the market is expected to develop in a pulsed manner. The upside space needs to pay attention to the changes at the mine end and the progress of quota applications by major Indonesian enterprises. It is expected that the main contract of Shanghai nickel will maintain a relatively strong oscillating trend in the short term.